If there’s one strategy financial advisors frequently recommend, it’s converting traditional retirement savings to a Roth IRA before retirement. The timing matters: the window to make a Roth conversion truly beneficial is often narrow, and your tax bracket determines whether it’s worthwhile.
Why Advisors Favor the 12% and 24% Brackets
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A Roth IRA conversion transfers money from a pre-tax account — like a traditional IRA or 401(k) — into a Roth IRA, where future growth and qualified distributions are tax-free and required minimum distributions (RMDs) do not apply. The trade-off is that the converted amount is treated as taxable income in the year of conversion, so you pay income tax on it up front. How much tax you pay hinges on your marginal tax bracket, and that determines whether the conversion pays off long-term.
Most advisors point to the 12% tax bracket as an ideal spot for conversions. At that rate, you’re paying relatively little tax now to secure decades of tax-free growth. For single filers in 2024, the 12% bracket topped out at $47,150 of taxable income, making conversions in that range especially attractive.
The 24% bracket is a common practical target as well. It’s higher than 12%, but it’s still low enough that converting meaningful balances can make sense without an onerous tax cost. For single filers in 2024, that bracket extended up to $191,950. Advisors often recommend treating 24% as a reasonable ceiling; converting into the 32% bracket or higher can make it take many years — sometimes decades — for the tax-free growth to offset the immediate tax bill. In those cases, spreading conversions over time or leaving pre-tax savings untouched may be better.
Timing Matters
Conversions are not only about the amount but the timing. Years with lower income create opportunities to convert while staying within a lower tax bracket. Life events such as early retirement, job transitions, or taking time off for caregiving can produce these low-income windows when a conversion makes more sense.
Market downturns present another opportunity: converting when account values are temporarily depressed means paying tax on a smaller taxable amount. If the market recovers, that regained growth happens inside the Roth, free from future taxes — a clear advantage.
Many people choose to spread conversions across several years to avoid a single large tax bill and to remain within a favored tax bracket each year. Smaller, annual conversions can keep you under the 24% line (or the 12% line, if possible), often saving thousands in taxes versus converting a large sum in one year.
Look at the Whole Financial Picture
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Retirement income seldom mirrors a steady paycheck: Social Security, part-time work, rental income, and distributions all shape taxable income in retirement. A Roth IRA reduces taxable income in retirement because qualified withdrawals aren’t taxed and RMDs don’t apply, making it a useful tool for managing future tax liability.
High earners who cannot contribute directly to a Roth often use the “backdoor Roth” approach: make nondeductible contributions to a traditional IRA, then convert to a Roth. This works, but tax bracket management still matters — converting too much too quickly can negate the benefit.
Remember state taxes. Where you live can change the equation, since state income tax on conversions adds to the federal bill. Large conversions can also affect Medicare premiums, eligibility for certain tax credits, and other means-tested benefits. Advisors typically recommend evaluating these ripple effects before executing sizable conversions.
No single tax bracket is ideal for everyone. Nevertheless, many advisors agree that staying within the 12% or 24% federal brackets often provides the best balance between upfront tax cost and long-term tax-free growth. The optimal approach depends on income, location, retirement timeline, and other assets.
How the Numbers Often Play Out
To illustrate: converting $100,000 in one year and landing in the 24% federal bracket would create a $24,000 federal tax bill. Add a hypothetical 5% state tax, and the total tax could reach $29,000. Alternatively, dividing that $100,000 into four annual $25,000 conversions might keep you within the 12% bracket each year, reducing total tax paid considerably. Using the example above, the multi-year approach could lower the combined tax to roughly $17,000, leaving substantially more invested in the Roth to grow tax-free.
The longer you have until retirement, the more compelling Roth conversions become. A 50-year-old with 15 years until retirement who converts portions of a balance while staying under the 24% bracket could see those funds double and then be withdrawn tax-free in retirement. That tax-free compounding is a major reason conversions are attractive when timed well.
Conversely, waiting too long — or converting while in a high tax bracket such as 32% or higher — can reduce or eliminate the benefits. Large conversions at elevated rates may not make sense unless you expect significant future tax increases or are planning for estate considerations.
Conclusion
Roth IRA conversions are a tool that rewards careful timing and thoughtful planning. The goal is to manage taxable income so conversions occur in lower brackets, ideally 12% or 24%, to maximize long-term, tax-free growth. Consider income expectations, market conditions, state taxes, potential impacts on Medicare and credits, and your retirement timeline before making conversions. For many people, taking advantage of low-income years, spreading conversions across multiple years, and converting during market dips can make Roth conversions a powerful component of a retirement strategy.